>> very forceful push back from the president last night on public television. that does it for this show. thank you very much for watching "squawk on the street" as we hit noon on the east coast. let's hand it over to "the halftime report" and scott wapner. thanks so much. it is noon in the east. welcome to "the halftime show." four hours to go until the close. let's look at where we stand on this busy and big day on the street today. triple digit gain as the fed sits down for its meeting. the dow is up nearly 108 points. the s&p 500 good for two-thirds of 1%. technology having another strong day as the nasdaq is good for three-quarters of 1%. here is what we're following. colonies capitalist. tom is the here with the best ways to make money in housing right now. "x" marks the spot.

u.s. steel is the fourth worst performer in the s&p 500 year-to-date. can the shares finally show some mett mettle? the fed and your money. the most important week of the year showing another day of gains ahead of bernanke's big decision and statement tomorrow. this is traders and investors debate whether this rally will continue or run out of steam. we're following it all with joe terranova, stephen weiss, simon baker. a little later we will be joined live by tom barrack. weiss, set the stage for us. the stocks are having another good day. where do we go from here? radio right n >> right now the think the market is discounting the fed is going to do nothing. they will continue with their dovish way. the interesting thing is i believe the market is still poised to have a great run here and if tomorrow proves to be a sell-off because of the fed announcement later in the day,

it's going fobto be a buying opportunity and not down for long. my concern is what happens going into earning season where i believe expectations have to go down. >> that seems to be the bear case. building on the fact that earnings are going to slow and be a disappointment. it's one that byron wean laid out on this very program a week or so good. what do you think the impact of that will be? will that come to fruition? does that end up being the thing that kills the rally? >> i think potentially it could. now, i don't necessarily if you're going see significant contraction in the earnings. the proo of is f is in the pudd. i think you will have. mon money managers sitting out the first few weeks in july. i just think overall right now the market is in this moment where it's kind of on a pause and it's really about a state of confusion. >> simon, the area of the market

most people are watching, the financials. is that the best place to be looking? >> i think the financials are one of the areas. i think very clearly the carry trade is over. the mlps, the reits, the utilities, staying away from those. the financial, the technology, the financials we've been talking about. look, technically the market is set up to go higher from here. i agree with steve. i think we get a little bit of a pull back. we hit 50-day moving average five times since september. >> yet steve everything you mentioned, you look forward, talk about earnings. what the disappointment may be. everything matters on what the fed says tomorrow, whether the word taper is used or any sort of form of tapering and what the ultimate impact on the market could be. >> i just don't believe they come out and say anything. look, here is the issue. the thing that will make us closest to japan is deflation, and right now despite every fed

watcher coming out, at least the ones negative on the dovish policies, have been inflation, inflation, inflation. guess what? we've done the other way. i believe that is reason alone for the fed to maintain their stance right now. >> i talked about this yesterday, i know steve liesman disagrees, but i think that's the best thing the market can get tomorrow is an acknowledgment that the inflation is not present right now and taking down the growth forecast for the economy. if you do that, if the fed tells you that, then you certainly skr to believe this argument of tapering. this is really a 2013 late story, maybe even into 2014. >> which is why you avoid commodities. >> i think bernanke did a brill yont job a month ago when he shaped the trees. where is the risk? i think we're going to see him calmer and the game is back on. >> no one is better to talk to than steve liesman. steve, what does your latest

survey reveal about what the fed is thinking? >> it's revealing, scott, that bernanke's words have had an effect. they've dialed back or made sooner the time of the taper. let's go to the time line. we can show you what's happened. here is the april survey for when the taper will begin. february 2014. now in the june survey, the average response is now december thi thi 2013. how about when we stop qe? it had been july 2014. unchanged in the current survey. and hiking rates, the last bit, all the way out here. so hiking the funds rate, 6/15. now it's still the second quarter. take the wider view and you see just that the time flt taof the taper and hiking the funds rate has widened out. i want to show you what the modal response is or the most frequent response was september

2013. here is the s&p outlook. 1654. so these guys, by the way, this group of 60 economists and strategists, they have chased this market higher. they have been pessimistic about the run. 1722 for a year from now. only looking for 4.5% rise in the s&p 500. treasury yields, even more interesting. 2.40. that gets us back to where we were in march. that's the outlook for the ten-year at the end of the year. but look at this. 2.80% june tax return for a group that's 23409 lonot lookin rate hikes. one thing we're chronicling is a sen sense of pessimism about the impact of qe. they were already down beat on whether it could lower employment. but they were net positive on the ability to lower bond yields. negative on the ability to lower mortgage rates and more pessimistic but still on the plus side about the ability of qe to raise stokts. a sense that maybe the medicine

is not having as much effect as it has in the past. stocks are up pretty strongly so the sense that it could power more stock gains getting a little more pes m is stick about that. >> i think that's an important point. thanks so much. let's bring in yet another voice to preview tomorrow's fed announcement. he's alex young from s&p capital. welcome back to "halftime." nice to see you. >> great to be here. >> what's the fed going to do? >> i think as the guys have talked about, it's probably going to be a little more dovish than what we heard a few weeks ago, but one thought i wanted to throw out there maybe a little different, i think some of the defensive areas could benefit if we see less of a focus on tapering, less of a likelihood of big move up in long-term bond yields. that should make dividend paying stocks incrementally more attractive. those things have been beat up. we have started to see people bottom fish that area. we like some cyclical areas but

we think there's still a place for dividend-paying stocks in investors' portfolios. >> that's an interesting thought. bond yields will be closely watched like they are today at 2.20%, 2.21%. you like discretionary. >> yeah, yeah. we've liked that one all year. it's basically a play on upside beats with the consumer, housing, retail. it's been an area we came into the year, it was pretty much under estimated, very low expectations, a low bar for companies to get over with their results, and that's fueled some good performance. we continue to like domestic focus on the cyclical side. we're underweighting materials. we want to keep it more domestic. >> what happens if the fed does come out with a less dovish tone tomorrow, alec? what does it mean for the rally that's taken stocks to 15,289 on

the dow? >> i think the latest bounce back off the 50-day at 1600 has been in anticipation of some dovishness. if we don't get that, i think we sell off. >> a lot of the appreciation we've seen in the s&p so far this year has been on increasing the dividend, a lot of capital allocation strategies for companies. do you see it ending or accelerating? >> i think the theme of dip dvid groet growth is still there. our colleagues at s&p dow jones indices, they track and forecast dividend growth. i think they're looking for another very strong year in dividend payments. >> yeah. we just had liesman going on saying the expectations of the yield is going to maybe 2.80% in 2014. where do you see yields going and at what point does it start to impact equities? >> i think we've already seen that higher bond yields, you

know, there's a lot of areas of the market not only in the u.s. but globally in the emerging market space, carry trades, that are very sensitive to this. so this initial thought that we may be nearing a peak in global stimulus has caused some knee-jerk profit taking in those areas but i think as cooler heads prevail, people will realize 2.20% is still a very low yield historically. i think we're looking for 2.5% by the end of the year. more or less in line with the street. i think our work shows you really need ten-year yields to get above 4% before it becomes a major headwind or equities and actually equities do very well as rates move up from the two to four zone because it tends to be a validation of earnings growth and the recovery. as long as rates don't go too high, i'm not sure that it means a death knell for this bull market. >> which is why you have a 1700 price target by the end of 2013. alec young, thank you so much. >> thank you. >> third point, the hedge fund

run by dan lobe raised its stake in sony to 7% from about 6.3%. third point also asking for the opportunity to address sony's board. look at what the shares are doing here. 3% throughout the day, maybe peeled off a little bit. >> welcome to america. dan lobe has been a master at getting companies to bend to his will and the reason is that it makes sense. so he looks to rationalize assets. he looks to take out shareholder value, and it's a much different dan lobe than we had before. he's a brilliant investor. i don't know how you can't take the ride with him on this particular tourney. >> a guy who has been incredibly bullish on what's taking place in general in japan of late. it all sort of plays together. >> it absolutely does. i think simon mentioned before the end of the carry trade. i don't think it's the end 69 carry trade because the yen has been the funding currency for

that. so i do see secular down trends that are in place for the yen that will continue to be in place and you see something from a very smart institutional investor like dan loeb, what he's doing with sony. he and he tells you what he thinks about sony but he's telling you what he thinks about japan that this time is different. >> i think it's really smart. on the entertainment business, it will cause more disclosures. more pressure on the management for accountability. >> he likes abe anomics. >> japan is very, very fat. this is just the tip of the iceberg. the other side of the join is they're protection iistprotecti. >> coming up next on "the half," why one of the worst areas of the market is poised to rebound. a bold call from alexandra leben

that will. and later tom barrack will be here live at post 9 speaking publicly about pulling the plug on his company's ipo. he'll also join us for the entire second half hour of the show. tell you how to make money in housing. and he has certainly done a lot of that. so stick around. before their gift helped preserve the point... before a credit solution was used to expand their business...

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welcome back to post 9. the nsa director continues to

testify down in washington as we speak and eamon javers has been covering the story. has the very latest on this revelation that the controversial surveillance program helped thwart a bomb plot at the new york stock exchange. >> that's right, scott. intelligence officials are testifying here on capitol hill. they're making the case that these nsa spying programs have been useful, legal, and overseen, but the fbi's sean joyce in an exchange with lawmakers explained that one of the attacks that they have been able to prevent as a result of this was what he called a nascent attempt to bomb the new york stock exchange. take a listen to this exchange between joyce and the members of congress who are teasing out a little more information. this may be the first time we're learning of this plot. here is the exchange. >> nsa on the op wi-fi which is khalid out of kansas city, that was the example i have referred to earlier. nsa utilizing 702 authority identified an extremist located

in yemen. this extremist located in yemen was talking with an individual located inside the united states in kansas city, missouri. that individual was identified as khalid husani. the fbi immediately served legal process to fully identify him. we went up on electronic surveillance and identified his co-conspirators and this was the plot that was in the very initial stages of plotting to bomb the new york stock exchange. we were able to disrupt the plot. we were able to lure some individuals to the united states and we were able to affect their arrest and they were conflicted for this terrorist activity. >> and so the fbi official there saying that this was a plot that was in the very initial stages in terms of an attempt to bomb the new york stock exchange. now, we've been able to get a may 2010 plea agreement in the western district of missouri, western division, for khalid

ouazzani. this is between. in this plea agreement what's interesting is they don't talk at all about a plot to bomb the new york stock exchange. they talk about bank fraud, money laundering, conspiracy to provide material support to a terrorist organization, but there are indications here that there might have been more going on behind the scenes in terms of communications, intercepts that are alluded to here. the document says over a period of years defendant and others discussed various ways they could support al qaeda. one of the ways they agreed they could support al qaeda was to provide currency to it. some of defendant's conversations with others also involved plans for them to participate in various types of actions to support al qaeda including fighting in afghanistan, iraq, or somalia. defendant and others he was communicating with took various steps to disguise their communications about their plans and assistance to support al qaeda. so, scott, some allusions here in this plea agreement from may of 2010 involving khalid

ouazanni that there were communications being monitored by u.s. officials but no hint here in this document that he was involved in a plot to bomb the new york stock exchange. we'll clearly be learning more about this from the fbi as the day goes on. >> we'll be following that as well. eamon, thanks so much. let's move our attention back to the market. the dow is up 115 points. u.s. steel is one of the worst performers in the s&p this year, but is the stock poised to rebound. let's debate it now. simon baker is the bull, stephen weiss the bear. >> i love to go against steve on this one. this is the second most shorted stock in the s&p. so clearly the story is over all over the place. i like those kind of names. goldman sachs came out with a report and added it to their most attractive. merrill lynch said they came back from a trip to china and the oversupply is priced in. they're doing $18 billion in revenue, they're going to lose money next year, going to $1.50.

that's 11 times earnings. if you really believe in global growth which i have heard weiss sigh a lot, you have to own this stock. railroads, railroads, railroads. the housing play i know weiss likes. again, this is a trade not an own. i think when it's the second most shorted stock any positive news on this stock will pop -- >> simon -- >> weigh want to get another point of view. >> here is the first thing i would suggest, that simon focuses more on the fundamentals. if he had done so he would recognize that steel is a major over capacity in china and there's no sign of it letting up. steel price continues to come down. u.s. steel, they make money maybe once every five years. it will be no different. despite the fact that they're operating at 82% capacity utilizati utilization, they still can't make money. the prices they have been getting are continuing to erode and it's where it was just last

year. by the way, 11 times next year's earnings on a commodity company is probably twice that the valuation should be. >> so you don't believe in global growth then, steve? >> it has nothing to do with growth. global growth doesn't raise all ships. there's such a thing as over capacity and commodity -- >> that's why it's the second most shorted stock in the s&p. the stock is crowded. there's going to be a short squeeze in the stock and you're going to be on the wrong side of it. >> let's save ourselves from another buzzer. >> i am short. so -- >> you and everybody else, steve. >> are you short? >> joe terranova, who made the more compelling argument? >> i went in believing that the turn for u.s. steel could happen. i read the goldman sachs report. i like what simon is saying, but i think after listening to steve, i agree, this really isn't so much about global growth and the sector. this is about the problems at u.s. steel. i'm going to go with steve. >> tell us who you think won

that debate. tweet us @cnbcfastmoney using the hash tag bull or bear. rising treasury rates are doing a number on the muni market. investors yanking over $1.5 billion from their municipal bond flow last week. with a sell-off this deep and a fed announcement coming tomorrow, what should muni investors do now? let's bring in the authority, alexandra lebenthal. we talk about these amazing outflows we've seen in the span of a week. and in many cases longer than that. as long as rates continue to rise and today we're talking a 2.21% ten-year, are these doomed? >> it's actually been three weeks we have seen historic outflows from municipal bond funds and as long as rates continue to rise, you will see that continue to happen. we have seen a lot of investors pull money out of bond funds and go into equities.

we've seen municipals sell up more than treasuries because they were actually overpriced before. one of the things people need to consider right now is if they believe that the market is going to continue to sell off, you know, your first loss is your best loss, and take your money out of funds and put it into short-term bonds or into a money market at this point. >> what do you think happens this week with the fed? how does that impact the whole story? because that really is one of the most important things to this story. >> well, that's obviously the $64,000 question, and i think for those of news the bond market, we're hoping for some clarity and hoping for some announcement that easing isn't over. i'm very surprised that we've gotten to this point as early as we have. i thought that we had a good number of months before we were going to see us in the position we're in right now. >> this may be an unfair question because you may not have the information with you. what would you say the average weighting of municipal bonds are in the average household

portfolio now versus historically? not the exact numbers. 20% more than it should be or on average? >> i'm stumped. i don't have the answer for that. i'm sorry to say. >> let me ask you this question, when you look right now, the environment in municipal bonds is being compared to august 2011. and what we've got coming this summer is a significant arment of potential in terms of reinvestment flows. i think it's like $125 billion. do you see that as real demand and enough to keep people in munis? >> well, you have got an interesting situation that's happened over the last several weeks. because june 1st there was a huge amount of money that would normally have gone into reinvestment and it did not. there's a lot of issuance that's coming out right now. we have over $6 billion this week, and those new issues come typically at cheaper rates than bonds that are in the secondary. so i think as the summer goes, we'll see what happens.

now, if rates do get to a point where they become more atrack 2i6, and i do think at some point you will see a rally in here. >> let me ask you about detroit. it's a wash. >> it's a big story. >> outlier or a slap in the face as to what can happen and the danger of investing in these? >> it's time i come on there are always some haters on twitter that will say, here she is, she's always the big promoter. i do believe detroit is an outlier. if you were investing in detroit all along, you have known it was a big problem. you have had 25% loss in population. half the taxpayers do not pay taxes. here is the thing with detroit though that's going to be a big issue. they have essentially said that general obligation bonds backed by the full faith and taxing power are unsecured bonds. if that were to hold up in court, i can't see it holding up, that's a watershed for all municipal bond market and we'll see what happens with that. >> you a part from detroit, which other states would you sort of avoid at this stage and

if you're building a municipal bond portfolio what is the average yield? >> i have been very vocal about puerto rico and staying away from puerto rico. their problems are massive. they have been downgraded across the board. so i would absolutely stay away from that. california has been a great success story. so i think people should look to that. i think people should stay relatively short, particularly as we see the uncertainty with interest rates right now. i would say anything inside of ten years but i would really look inside of five years at this point. >> alexandra, great to see you as always. >> thanks. >> lebenthal and company president and ceo. today on big data download, the committees between rates and stocks. how do some of the biggest sectors on the s&p 500 tend to do when yields do tick higher? check out how discretionaries, industrials, and tech rise. you see solid gains across the board. how do some of the biggest

sectors fare when rates fall. next, we're heading to the futures pit. gold is struggling to find momentum. our pros give you the trade when "the half" comes back. the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

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time now for the top three trades. we're doing it from post 9. first up, the philly defense sector hitting a new record high for the second day in a row. boeing one of the big winners in that index. shares have soared, joe, to a five-year high, and really defense stocks, aerospace have been unflappable. >> the orders have been robust. i said sell it on 99. that's a complete wrong call on my part. a lot of the speculative community is in gen corp. there's nothing wrong with the space. >> next up, the battle between

sprint and dish network intensifying with sprint now suing dish networks to block its offer to buy clear wire. simon? >> exactly. that's pretty much the story right there. but furthermore -- >> can i go there? >> furthermore, the point i'm trying to make -- >> you don't have any insight into it because we can just skip you if you don't? >> shareholders require 75% of the vote and their point is, look, we own a big stake in it. can't even go through if we own a bigger stake. that's the point. the stock sup on that news. >> maybe the bigger part of the story is the fact the deadline is today for dish to make a counter, another higher offer above softbank. that deadline appears to have come and gone which is maybe why the shares are moving today. we'll see on that. there's a look at dish today up more than 1%. thanks for playing though, simon. let's go to steve weiss. yahoo! reporting to pay up to $40 million for a social start up. >> he's still a little unsettled

from the debate. cut him some slack. in terms of yahoo!, marissa may mayer, she definitely has a vision for the company. she's going out there and not wasting any time. this is an industry that moves very, very quickly and making acquisitions. here is the downside of it. you really don't know how they're going to work out. i bet with her. i don't own the stock but i think you continue to own it right here. >> we have some breaking news. back to headquarters. josh lipton is watching dell. interesting story developing here, josh. what do you have? >> some headlines just dropping here on eye cob icon and dell. icon proposing dell commence a tender offer at $14 a pop. icon announcing a prven purchase of 72 million dow shares. you can see the sharp pop in dow shares. right now up a half a percent.

>> an interesting new development from carl icahn. do you want to make a comment? >> it's incredibly interesting. what icahn is looking at he's got limited risk. he's trying to force them into doing something. what we really don't know is when he's going to come up with the financing for his own offer. >> let me just let you know as well as part of this letter from icahn, he says a major bank has agreed to $1.6 billion in financing. is that right, john malloy? >> but he's still short. >> he needs $5 billion -- >> he's putting 2 up on his own and 1.6. >> but it's symbolic as well in that if there was any balking among major firms to get involved in the financing, you get one, you get two, you get more, you get your number. >> we don't know who the bank is and we don't know in that letter because i haven't seen it what the conditions -- >> it's not the international finance branch of yemen. >> but we don't know what their

conditions are. if their conditions are on him coming up with the rest of the financing. if the conditions are inputting $3 billion instead of $2 billion. there's toomp unkno much unknow. if michael dell walks away, there's a lot more risk to it. >> gold meantime dropping to the lowest level in nearly a month as fed jitters hang over the yellow metal. let's go to jackie and the futures now crew. >> good afternoon. gold's near $20 drop coming before tomorrow's fed announcement which is guaranteed to be critical for the gold trade. jeff killberg, is gold telling us something about what bernanke is going to say tomorrow? >> well, jackie, the selling pressure we're seeing today, specifically after thec pi data came out, we took another leg lower, put out a 1360 peg. it is telling us there's a bear stance. or if they do try to taper at all. but we're in the camp, this is

why we want to be buyers down here on gold. we see gold shine again for three specific reasons the fed will not taper. one, inflation. we saw the number this morning. secondly, we're seeing the data. we don't have the data strengthening the economy support we want or for the fed to walk away. finally, the fed said they would be committed and stick with the stimulus until we see the unemployment rate go under 6.5%. we're nowhere near. we actually upticked last month. that's why we think it's the lower end of the range, a buying opportunity in gold. >> so you think the fed is not going to back away, buy gold her. anthony, what kind of move to you think gold is going to make tomorrow in your view? >> jackie, i think it's completely wrong to buy gold her. this show is kaulgd futures and he's still looking at the past for decisions he's making on gold. the fed has been easing for a year and a half and gold has done nothing but drop. it's all about inflation, inflation according to that cpi number, jeff is right, doesn't exist at this point. it's even detached from the dollar which has shown weakness and gold is still lower right

now. so i don't think it really matters what the fed does. if they continue their qe, it won't matter to gold. it's still going lower. if they decide to pull bark, that could be very bearish for gold but i don't expect that. if we settle below 1370, it looks like we will, you want to be short gold. >> a buyer and a seller. that's what makes markets. catch more of jeff and griz on on online show and don't miss this one because pimco's tony crescenzi is predicting what the fed will announce and ron paul will proclaim what ben bernanke should do. it's live 1:00 p.m. eastern futures now. >> jackie, thanks so much. we will be there top of the hour online. this news and this new development regarding carl icahn and dell is a perfect time to remind you that carl icahn is going to be one of the big keynote speakers at our signature event, that being delivering alpha, july 17th. there he is, carl and i will have a great conversation over

there is hope all of you can be there. if you need more information on that delivering alpha.com. can't wait for that. meantime, coming up on requesting the half," from housing to ipos, to new bubbles brewing in the housing market, tom barrack is joining us for the remainder of the program. we're back with mr. barrack in two on post 9. [ kitt ] you know what's impressive?

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[ roars ] ♪ [ roars ] ♪ [ roars ] ♪ [ roars ] ♪ [ male announcer ] universal studios summer of survival. ♪ real estate is one of this year's biggest bright spots but all of the taper talk ahead of tomorrow's fed meeting is causing investors to worry if raising rates will hit the housing market hard. let's bring in tom barrack behind colony capital. he's back with us today live here at post 9. it's great to see you always, but especially here at post 9. >> thanks, scott. always great to be the slowest

guy at "fast money." >> let's talk this ipo first and foremost. you were going to ipo colony american home. you pulled it. why? >> it was like raising the beautiful baby child that we had home schooled, became captain of the football team, spoke five languages, we sent him to exeter, he was on the way to get a full scholarship for football and they asked him to be on "the bachelor." when we showed up to take him on tv it was "the octagon." and the market from may 27th to june 4th was probably the worst ski slope downward for reits in history. so we didn't need the capital. the business is very simple. there's about 120 million single family units, $18 trillion. it's the largest single asset class in the world and the great thing about it is you can't trade it on your computers, nor

can the etfs. so it's still that last bastion of arbitrage for individuals of collecting the most inefficient distribution of distress we have seen in the last 30 years. >> are you saying -- i mean, did taper talk kill the ipo? is that essentially what happened? >> well, i think a couple things. taper talk certainly moved everybody off of interest rate sensitive stocks. this happened to not be one. the opportunity here is a growth stock. so you have three gigantic category killers. you have wayne hughes with american properties for rent. you have blackstone that has the invitation homes and you have us and a couple good companies in the market already but the company viewed them as yold plays looking for a diffident. it's not about dividend. this is amazon at its beginning. what's coming through the pipeline of foreclosures is still monstrous. and the transition to rental, especially in a market that's as

tumultuous is this, the bottom line in home building is there's too little supply of everything. everybody will benefit. multifamily will benefit, home builders will benefit. what's happening with home builders today is not that the numbers and starts are off, it's that they can't get delivery. they can't get delivery of finished slots, differ delivery lumber, delivery of concrete. the demand is way, way up. >> can you give us an idea of what the future of thei po may be? are you going to revisit it at some point if this story turns around? >> sure. we have $2.5 billion of private capital, and at the moment for total return we're so thankful to have it in private capital because we're not focused on the yield portion. we're focused on the growth. it's mispricing. harvesting that mispricing and getting it to the rental market and stabilizing it is key and that will happen whether it happens in the next few months, the next year, the next two years. it will happen and it will be the biggest asset class we think

in the reit business. >> impact of rising rates on housing in general. i know you have a lot of thoughts on that. you will stick with us? >> absolutely. >> tom will be here for another 20 minutes or so. when we come back, housing has been one of the big winning trades this year but is there still value to be had in that space? as we mention, mr. barrack of colony capital gives his best ideas in housing when "the half" comes back. [ male announcer ] this is kevin. to prove to you that aleve is the better choice for him, he's agreed to give it up. that's today? [ male announcer ] we'll be with him all day as he goes back to taking tylenol.

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hey, everybody. coming up on "power lunch," neil ferguson, time calls him one of the most influential people in the world. he's with us for the entire hour. we'll get his take on the decline of america's institutions and why he think it's ever harder to do business here in the good old usa. plus, big story of the day, housing, boom, bust, real estate stop investors here to talk about it. and from housing to hummus. is it the next peanut butter? no. nutella is the next peanut butter. but we'll talk about hummus nonetheless. >> for the record, i like both. welcome to post 9. we're back with tom barra barrae ceo of colony capital. when we look at the home builders, let's go right to the bottom, home builders, what do

you do now given their performance recently because of rising rates? is there still money to be made or is this story over for a while? >> look, it's a tremendous buy. the good news for the home builders is they start planning profitability five years ago. so the big value of the home builders has been deferred taxes rolling forward plus the discounted value of the finished lots they have on their books. the problem is they have now built on all the finished lots. the land development business is catching up. home builders have traded at 1.4, 1.5 times book. affordability at the entry level may get hit a bit but traditional rates on 30-year fixed mortgages which has been the best investment for americans has always been in the 6s for the last 10 or 15 years. so all of this hoi polloi over trf interest rates raising will hit affordability.

but the supply is so dismal in every category, in every category of home building and every category of rental. we bought 13,000 houses, we're renting them in 21 days. from the time they're rent ready. multifamily is full. 96%, they've raised rents 15% in the last 12 months. they're building as fast as they can. they're still under delivering. every aspect of housing needs a fix, and the shadow banking system is still fraught with foreclosures. so coming through the sausage factory final ly at the end of litigation you're getting 6 million foreclosed houses which is both supply and demand. you have to clear the houses from banks and you have 6 million displaced families that need a place to live. >> if home builders' sentiment keeps going up, why does supply continue to be so constrained? when does construction meet sentiment because it doesn't seem to be meeting at some sort

of equilibrium? >> home builders have never been properly appreciated by the public markets. why? because it's a lot manufacturing business. a house whether it's $45 or $55 a square foot to build, that's or $55 a square foot to build, that can be discussed. you used to be able to have bond financing, in other words, where they would finance streets, gutters, utilities, the clubhouse, schools, libraries. today, if you mention that to a bank or the four-letter word which is land and they throw you right out the door, so there's no financing for finished lots, and that process takes three or four or five years for the entitlement process so by the time they gear up to meet the supply, the market has ebbed and flowed which is why they are really not focused on the fluctuations in daily interest rate markets, nor should we. it's the best opportunity. housing today is not a bubble there. may be a bubble in the fed which is necessary to make what's happening happening a slow, soft increase in jobs and

predictability. house sergeant best buy for the average american because they can vote with their feet. they understand they know the house across the street, know the house on the corner. you can get a fannie or freddie loan and if you have a fico skor that's good, you can be in business. >> when the floodgates open and the new inventories come out, why doesn't that pressure home builders? >> that's a good question. the answer is the demand for both sectors is broad. what happens on a foreclosed house, the poor family that was foreclosed on goes into credit purgatory so for three or four years they can't get a loan, their scores have been crushed and most of them don't have a $20,000 payment. we're talking a $160,000, $170,000 house. those families are renters.

they have kids and dogs and mom and dads living with them. they have cars in the garage. they have stuff that they put in public storage. they need a house. there are no houses. they can't buy them and they can't move into a rental property. new houses mostly in the suburbs, toll is doing a great job in urban, avalon babe moving into urban with multi-family but the demand is greater than the supply and we haven't talked about new household formations and what's happening with gen-y. it's that the supply chain cannot be fixed by a click of the button on our computer. >> we'll take a quick break and more investing ideas with tom. we'll do final trades to let you know who you think won the debate. all that and much more after this short break.

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welcome back to the "halftime report." i'm josh lipton. look at nokia, a big intraday pop. the headline if "the ft." waway would look at purchasing nokia, depending on a willingness of nokia. saying nothing is on the table, and still you can see that stock is up more than 10% right now. scott, back to you. >> josh lipton, thanks so much. a conversation now, the best ideas in housing right now are what? >> the best idea is a housing recovery. a brilliant partner who is with balinese, and we put together a concept of how do you take

advantage of what we see as this mountain of opportunity in a simpler way, and it really is investing around the edges in things like mgic and private mortgage insurance will be the beneficiary of zero default rates of going forward, gigantic nols rolling forward to protect the income. you match that with home depot, mohawk, take home builders, william lyon, lennar, avalon bay on the multi-family side, public storage and pair them by regions, and you can get delivery of mechanisms, things like the property management systems and the mortgage management systems of how these things derive. is fannie or freddie going to be privatized? who knows. we went from fannie and freddie being worthless in conservatorship. >> you in a speculative place? >> we bought the preferreds. you're betting on the full faith and credit bailing out the capital structure. >> i've got to take a quick

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been a big day tomorrow and a big one tomorrow. wees, ticker symbol? >> weis won the debate and "power" starts now. >> good afternoon, everybody. surveillance location and the nsa. the government says the program foiled an attack on the new york stock exchange, and that's where we begin this hour. sue is at the new york stock exchange. >> hi, ty, and since that plot was made public, the security here is a little bit tighter, and it is a very sobering reminder of the fact that the united states and new york in particular and this very building are still the bullseye for many international terrorists. eamon javers has been watching the nsa hearings very closely and joins us now live in washington. eamon, over to you. >> hi, sue.